Estimating the size of informal economy in a post-transition country – the case of Poland

Stanisław Cichocki and Andrzej Torój
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Andrzej Torój: SGH Warsaw School of Economics, Institute of Econometrics, Warsaw, Poland

Baltic Journal of Economics, 2023, vol. 23, issue 1, 91-116

Abstract: The size of the informal economy in Poland is estimated by means of the Currency Demand Approach (CDA). Using quarterly data for the period 1999–2019, we adopt two separate econometric approaches. First, we specify a single equation model to estimate it with the Fully-Modified OLS method. Second, the CDA coefficients are treated as a cointegrating vector in a cointegrated VAR. The size of the informal economy in Poland is found to have diminished from about 32% of GDP in 2000 to about 12% of GDP in 2019. We provide confidence intervals for our estimates which, to our best knowledge, are rarely presented in the literature; their width ranges from 3 to 7% of GDP.

Keywords: Informal economy; currency demand approach; cointegration; vector errorcorrection (search for similar items in EconPapers)
JEL-codes: C10 E26 H26 O17 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:23:y:2023:i:1:p:91-116

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